Zim gets costly Eskom bailout

The electricity bail out deal between State-owned power utility Zesa and Eskom of South Africa has resulted in the importation of 50MW which is inconsequential and costly, Energy and Power Development minister Fortune Chasi has said, as rolling power cuts continue.

Power cuts, which last for about 18 hours, have held the economy back which is also grappling with foreign currency shortages.

Last month, Zesa entered into a power deal with Eskom of South Africa to access about 400MW. But Zimbabwe is getting 50MW on a firm basis contract at a costly price of US$0.28 per kilowatt hour.

The balance, Chasi, said was just the right to access electricity if South Africa has surplus. This doesn’t mean Zimbabwe is getting the 400MW, because the two countries signed a non-firm contract, meaning South Africa can only supply Zimbabwe if only it has surplus. In fact, South Africa is battling load-shedding.

Chasi described the deal as an “overdraft” like type. Zimbabwe owes Eskom more than US$50 million in unpaid bills. He said the power situation is dire.

“We have the right to access 400MW from Eskom. But, what we are getting is 50MW which is on firm basis contract. The balance is accessed as an overdraft type. It’s just the right to access and the balance operates just like an overdraft, which is not easy to access and service. It’s also expensive. Mozambique’s US$0.06 per kWh,” Chasi said.

“But what we should know, which is important is that we are not children of South Africa, we need to pay our bills (to allow ZESA to be viable). HCB is giving us 50MW on firm basis and we are looking at getting 150MW.”

Energy experts say the 50MW is enough to power a small town like Zvishavane. Zimbabwe supplies local consumers at US$0.03, a situation which threatens the viability of Zesa, which operates five power stations in Kariba, Hwange, Bulawayo, Munyati and Harare.

While electricity price in South Africa is pegged at US$0,09, which appears to be one of the cheapest in the world, Zimbabwe imports from its neighbour at a massive US$0,28, making the country’s products uncompetitive due high input costs. This is unsustainable, according to several analysts who spoke to this publication this week. Zimbabwe’s electricity woes are likely to continue because water levels at Kariba Dam have fallen to low levels.

According to Chasi, the levels have fallen to about 20%, meaning the Kariba Hydroelectric Power Station is likely to be shut down by November or December. The situation has also been worsened by equipment frequent breakdown at its thermal power stations.

Chasi warned that Zesa will fast track its collapse in the absence of a review in tariffs. His remarks reaffirm a previous statement made by the Zimbabwe Power Company’s business development manager, Bernard Chizengeya, who recently told Business Times that despite the increase in the tariff, it remains uneconomic.

Last month, government hiked tariff to US$0.27/kWh from US$0.0986/kWh for domestic consumers. Non-exporting businesses now pay a tariff of S$0.45/kWh. “We have a tariff that can’t buy a sweet. We must move to cost reflective for reasons that Zesa must be solvent. It’s owed ZWL$1.2 billion. It’s key, we need new investment and understand the capacity of Zesa to pay them. If we don’t do that, we have not started,” Chasi said.

He said the starting point is to “sanitise Zesa inefficiencies to make sure it is efficient”. “Because of the inefficiencies, we talk about power theft, losing ZWL$40 million every year. I can’t tell you a figure. But, we have made presentation at US$0.13. The current US$0.03 can’t buy a bubble gum. But, the pre-condition is to clean up inefficiencies.”